Tag Archives: housing prices

Rent prices are climbing faster than asking prices and are rising in metros where asking prices are falling, according to a report from Trulia.

Year-over-year, nationwide rent prices were up 5.1 percent in October, while asking prices were up 2.9 percent during the same period when including foreclosures.

Out of the top 25 rental markets in the United States, Houston led with a 16.5 percent yearly increase. Miami and Oakland took the next two spots with a 10 percent gain in rent prices, Trulia reported.

Denver was ranked number 4 with a 9.4 percent increase and Seattle fifth for its 8.8 percent improvement.

Chicago, which saw a 5.3 percent yearly dip in asking prices in October, still experienced a 7.7 percent gain in rent prices during the same one-year period.

Asking prices also fell in Albuquerque, dropping 2.2 percent, but rent prices moved up by 3.1 percent.

The trend was reversed in Las Vegas, where asking prices were up 10.9 percent from October 2011, while rent prices moved downward by 1.8 percent. In Memphis, rent prices were also down, falling 0.6 percent, yet asking prices increased 7.1 percent over a one-year period.

Overall, most metros saw rent prices and asking prices increase. Out of the 100 largest metros, 69 took part in the yearly gain in asking prices.

“In markets like Denver, San Francisco, and Oakland, where prices and rents are both rising, higher prices mean higher down payments, but rising rents make it harder to save enough,” said Jed Kolko, Trulia’s chief economist, in a release.

“Home prices are climbing in most local markets and in eight of the eleven swing states,” Kolko added. “Rising prices have taken pressure off the presidential candidates from having to come up with detailed plans to help the housing market, and that’s a big reason why they haven’t focused on housing in the 2012 campaign.”

Trulia’s findings are based on the for-sale homes and rentals listed by the company.

Home prices in July saw the biggest nationwide year-over-year increase since August 2006, CoreLogic reported Tuesday.

According to the company’s July Home Price Index (HPI), home prices-including distressed sales-increased year-over-year by 3.8 percent in July. On a month-over-month basis, prices increased 1.3 percent from June.

July marked the fifth consecutive increase in home prices on both a monthly and yearly basis.

Of the top 100 Core Based Statistical Areas (CBSAs), only 23 showed year-over-year declines, four fewer than June.

CoreLogic also reported that its Pending HPI forecasts more monthly and yearly increases ahead. According to the report, prices (including distressed sales) are expected to rise at least 0.6 percent from July to August, putting August on track for a 4.6 percent year-over-year increase. Excluding distressed sales, CoreLogic anticipates price gains of 1.3 percent month-over-month and 6.0 percent year-over-year.

Mark Fleming, chief economist for CoreLogic, said the positive growth will likely lead to price gains for the full year.

“The housing market continues its positive trajectory with significant price gains in July and our expectation of a further increase in August,” Fleming said. “While the pace of growth is moderating as we transition to the off-season for home buying, we expect a positive gain in price levels for the full year.”

Company president and CEO Anand Nallathambi agreed.

“It’s been six years since the housing market last experienced the gains that we saw in July, with indications the summer will finish up on a strong note,” Nallathambi said. “Although we expect some slowing in price gains over the balance of 2012, we are clearly seeing the light at the end of a very long tunnel.”

Sales of existing homes are strengthening and prices continue to rise, stoking confidence in the housing market’s recovery.

According to the National Association of REALTORS®, resales of single-family homes, townhouses, condominiums and co-ops grew 2.3 percent in July from June to a seasonally adjusted annual rate of 4.47 million. The measure took an unexpected fall in June.

Resales jumped 10.4 percent compared with the same month last year. Economists at the association believe sales could reach 5 million next year.

Nationwide, prices were on a tear, with the median rising 9.4 percent from a year ago to $187,300 last month. The increase is the largest since a 10.2 percent boost in January 2006.

Demand is stronger due to low mortgage interest rates and rising rents, according to Lawrence Yun, the group’s chief economist.

But “the market is constrained by unnecessarily tight lending standards and shrinking inventory supplies, so housing could easily be much stronger without these abnormal frictions,” Yun said in a statement.

Though first-time buyers made up more than a third of resale clients, in normal housing conditions they’d constitute 40 percent. Many are still being pushed out by investors making all-cash offers, even though the ranks of such buyers are shrinking .

Distressed homes, which include foreclosures and short sales, made up 24 percent of sales in July, down from a quarter the previous month and nearly 30 percent a year earlier.

The median price of a single-family home was $188,100, up 9.6 percent from the same period in 2011. Sales of such properties rose 9.9 percent over the same period to an annual rate of 3.98 million.

National home prices saw both quarterly and yearly gains in June, and all four regions across the U.S. posted quarterly increases, according to the Home Data Index (HDI) released by Clear Capital Tuesday.

Home prices rose by 1.7 percent in June from the previous quarter and a year ago, and growth is expected to continue into the second half of the year at a rate of 2.5 percent, Clear Capital reported.

Broad-based regional gains and expanding progress are reasons for the current gains and expected future growth.

Out of all four regions, the West saw the greatest quarterly increase at 3.5 percent, followed by the Midwest (1.2 percent), the South (1.5 percent), and the Northeast (0.8 percent).

“June home price trends provided further evidence that housing has turned the corner, with the momentum of the recovery picking up speed,” said Dr. Alex Villacorta, director of research and analytics at Clear Capital.

Villacorta noted that even the Midwest started to catch up with the other regions, shedding the drag of recent declines.

With its 1.2 percent gain in June, the Midwest saw the greatest quarterly improvement after posting a 2 percent quarterly loss in May.

The West was also notable due to the region’s gains across all price levels as demand outpace supply for the region. Clear Capital explained in a report that recovery generally begins in lower priced segments for most markets, but the West is seeing price increases in higher priced homes.

Out of the top 50 metros areas, 7 saw quarterly price declines in June, but only four reported declines greater than 1 percent.

Phoenix was highlighted as a market with consistent growth over the past 10 months. Quarterly growth for the metro was 8.7 percent and annual gains were 20.4 percent.

For the year, Seattle is expected to surpass all other markets, with prices projected to increase by 14.4 percent by the end of the year, the report stated.

“Looking forward over the rest of 2012, we expect to see national, regional, and most metro markets improve by varying degrees. And while it’s encouraging to see broad-based advancements coupled with positive forecasts, we remain cautiously optimistic. The current strength in housing fundamentals remains vulnerable to domestic and global economic challenges,” said Villacorta

Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.

The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago. Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters. However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings. Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.” In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.

While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.

Despite the fact that key market indicators released in recent weeks have shown declines in home sales, anecdotal reports from real estate agents in the field suggest “better days are ahead for the industry,” according to commentary released Monday by the economic team at Wells Fargo Securities, LLC.

Even builders – who’ve endured possibly the steepest drop-off in business over this downturn – are optimistic heading into the spring, the economists note.

As a result, Wells’ economic team has nudged its forecast for home sales slightly higher, as the spring selling season appears to have gotten off to a strong start. They are now expecting sales of existing homes to top out at 4.50 million in 2012 and rise to 4.65 million in 2013. These annual projections compare to 4.26 million existing homes sold in 2011.

“While employment conditions have clearly improved and consumer confidence and spending have risen, we remain concerned about the lack of real after-tax income growth.

That said, the anecdotal evidence is hard to dismiss,” the economists write.

Most real estate agents are reporting “significant gains in buyer interest and sales,” and these gains are organic rather than incentive induced, according to the Wells Fargo economic team.

Unfortunately, they note that conservative appraisals and tight mortgage underwriting continue to undermine a large number of deals, however, they “suspect that the undertow from these two hindrances will subside over the course of this year, as the fog surrounding shadow inventories lightens up a bit and more lenders come back to the market.”

Unseasonably warm weather led to upticks in existing-home sales in December and January. Those gains were paid back with a 0.9 percent decline in February, but the economic group at Wells says the underlying trend remains positive and they expect to see further improvements as the spring homebuying season kicks off.

Distressed transactions still make up a considerable portion of overall sales activity and will continue to pressure prices through at least the first half of 2012, they note in the report. Real home prices are now back down to 1999 levels, as are price-to-rent ratios, according to the economists.

“We expect home prices to definitively bottom by the middle of this year, as the backlog of foreclosures finally begins [to] clear,” writes Wells Fargo’s economic team. “For properties not in foreclosure, prices have probably already bottomed, but should remain relatively low” given the competition from foreclosures.

Standard & Poor’s reported Tuesday that it’s closely watched Case-Shiller index declined in January for the fifth straight month, with both the 10-city and 20-city composite readings slipping 0.8 percent from December.

But according to John Burns Real Estate Consulting (JBREC), that’s stale news and doesn’t reflect what’s actually happening in the market right now. In fact, the independent research company says home prices are rising.

JBREC conducted its own analysis of home prices in 97 markets and found that over the January-to-March period prices are up in 90 of them. The average price increase over the last three months is 1.1 percent, or a 4.5 percent annual rate, according to data issued by JBREC just before S&P’s Case-Shiller release.

The company also found that home prices have been trending up nationally since January, and even more markets have turned positive recently, with 93 of the 97 markets it analyzed showing appreciation over the last month.

So why are other industry indices still painting a picture of the doom and gloom of freefalling home prices? Wayne Yamano, VP and director of research for JBREC, says it’s because most price indices are on a three-month lag.

Yamano explains that after hundreds of hours of research vetting 23 data sources and running calculation after calculation, JBREC developed the Burns Home Value Index (BHVI), which calculates home values based on prices that are set at the time purchase contracts are negotiated and signed.

Nearly all other indices are based on when the purchase transaction closes, he says, which is typically two months after the purchase contracts were negotiated. Then, it takes one to two months for the closing price data to be compiled and reported, according to Yamano.

He contends that the BHVI is a better assessment of current changes in home prices and precedes median price data from the National Association of Realtors by three months and the S&P/Case-Shiller index by four to six months.

“It is current because it uses what is happening in MLS databases all over the country, as well as some leading indicators we have determined are reliable,” Yamano explained. “We call it a Home Value index because it is partially based on an ‘electronic appraisal’ of every home in the market, rather than just the small sample of homes that are actually transacting.”

JBREC has calculated BHVI index values for the United States and 97 major metro areas, with history going back to January 2000.

“The slow housing market recovery is underway, and it can accelerate or turn down quickly,” said Yamano. “The future is uncertain, and it is even more uncertain when you are using data that is three months old.”

Last year was a good year for home bargain-hunters, according to the latest data from Radar Logic. The firm’s January report revealed a 5.42 percent decline in prices from January 2011 to January 2012 and a simultaneous 7.7 percent increase in transactions.

However, despite the year-over-year increase, home sales decreased 23.5 percent in the month ending January 19. The decline was greater among traditional sales, which fell 25.9 percent, than distressed sales, which declined 15 percent.

The discrepancy between traditional and distressed sales enhanced the overall price decline, according to the Radar Logic report, which stated, “the relative increase in distressed sales weighed on the RPX Composite, exacerbating its decline.”

The 5.42 percent price decline over the year brought Radar Logic’s composite to its lowest rate since July 2002.

However, the rate of decline did slow toward the end of 2011, but Radar Logic nonetheless suggests the market has not yet reached bottom.

“Frankly, I don’t think we’ve reached the bottom in housing prices,” said Quinn Eddins, director of research at Radar Logic.

Supply continues to outpace demand “particularly if you consider homes in the foreclosure process and those under water,” according to Eddins.

“At very least the excess supply will delay the recovery in housing prices, and could well push prices lower,” Eddins said.

Radar Logic predicts prices will remain flat this year and next before increasing “at an accelerating pace” in 2014 and 2015.

Even with recent reports of rising mortgage rates and falling home prices, Capital Economics stated it still expects the housing recovery to be underway. The research firm cites two reasons in a report on why mortgage rates won’t threaten recovery: rates can only rise so far when tighter monetary policy is still years away, and homes will still be affordable even if mortgage rates were to rise back to normal levels. Last week ending March 15, Freddie Mac reported the 30-year fixed rate at 3.92 percent, an increase from the 3.88 percent reported the prior week, but still below 4 percent for 15 consecutive weeks.

“We doubt that higher mortgage rates will derail a housing recovery that in the last six months has seen total home sales rise by 13 percent and the NAHB homebuilder activity index more than double to 28,” the research firm stated.

In addition to those recent reports, home prices are still dropping, with data from Zillow showing prices declined 4.6 percent from January 2011 to January 2012. “Also, the fall in house prices over the last five years has been so large that even more normal mortgage rates would leave housing looking very affordable. And with housing appearing undervalued relative to disposable incomes per capita, valuations are also very favorable,” Capital Economics stated.

An economic outlook report from Fannie Mae echoed a similar sentiment about the direction of the housing market in a report Monday and stated, “GDP revisions for the fourth quarter of 2011 indicated a stronger underlying pace of demand with higher consumer spending and business investment.” After four months of private sector payroll growth, the GSE named employment growth as an important factor in housing recovery.

Even with declining home prices, Capital Economics explained it can take up to six months for changes in demand and supply to have their full impact on house prices because even with attractive asking prices, it can still take a few months to find a buyer and another month or so before the contract is closed.

Home affordability has reached the highest peak since 1970, which is when the data was first recorded, according to National Association of Realtor’s (NAR) housing affordability index. The index rose to 206.1 in January, and an index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced single-family home, assuming a 20 percent down payment and 25 percent of gross income for mortgage principal and interest payments.

“This is the first time the housing affordability index has broken the two hundred mark, meaning the typical family has roughly double the income needed to purchase a median-priced home,” said Moe Veissi, NAR president.

While projections about future mortgage rates and home prices have been mixed, NAR expects little change and anticipates affordability levels will stay high through 2012.

“Housing inventory levels have declined to a point where conditions are becoming much more balanced in much of the country,” Veissi said. “If access to credit improves, we could see a much more meaningful increase in home sales and broader stabilization in home prices with modest gains in areas with stronger job growth.”

The index is based on the relationship between median home price, median family income, and the average mortgage interest rate.